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7. Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

7. Stock Based Compensation

2019 Plan

On April 29, 2019, the Aemetis 2019 Stock Plan (the “2019 Stock Plan”) was approved by stockholders of the Company. This plan permits the grant of Incentive Stock Options, Non-Statutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator of the plan may determine in its discretion. The 2019 Stock Plan’s term is 10 years and supersedes all prior plans. The 2019 Stock Plan authorized the issuance of 200,000 shares of common stock for the 2019 calendar year, in addition to permitting the transfer and grant of any available and unissued or expired options under the prior Amended and Restated 2007 Stock Plan in an amount up to 177,246 options.

Employee grants have a general vesting term of 1/12th every three months and are exercisable at any time after vesting subject to continuation of employment. Option grants for directors have immediate vesting with a 10-year term expiration.

With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock Plan and the Amended and Restated 2007 Stock Plan (the “Prior Plans,” and together with the 2019 Stock Plan, the “Stock Plans”) are terminated for granting any options under either plan. However, any options granted before the 2019 Stock Plan approved will remain outstanding and can be exercised, and any expired options issued pursuant to the Prior Plans can be granted under the 2019 Stock Plan.

On January 9, 2020, 771,500 stock option grants were issued for employees and directors under the 2019 Stock Plan. On March 28, 2020, 1,075,500 stock options grant were approved by the Board for employees and directors under the 2019 Stock Plan.

On April 3, 2020, 450,000 stock option grants were issued for employees under the 2019 Stock Plan with 10 year term and immediate vesting.

On June 4, 2020, 10,000 stock option grants were approved by the Board for a director under the 2019 Stock Plan with 10 year term and 2 year vesting.

On August 27, 2020, 13,000 stock option grants were approved by the Board for new employees under the 2019 Stock Plan with 10 year term and 3 year vesting.

As of September 30, 2020, 5.8 million options are outstanding under the Stock Plans.

Common Stock Reserved for Issuance

The following is a summary of options granted under the Plans:

		Shares Available for Grant				Number of Shares Outstanding				Weighted-Average Exercise Price
Balance as of December 31, 2019			147				3,746			$	1.38
Authorized			2,342				-				-
Granted			(2,320	)			2,320				0.69
Exercised			-				(232	)			1.27
Forfeited/expired			83				(83	)			0.76

Balance as of September 30, 2020			252				5,751			$	1.12

As of September 30, 2020, there were 3.9 million options vested under all the Plans.

Stock-based compensation for employees

Stock-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

For the three months ended September 30, 2020 and 2019, the Company recorded stock compensation expense in the amount of $191 thousand and $144 thousand, respectively. For the nine months ended September 30, 2020 and 2019, the Company recorded stock compensation expense in the amount of $826 thousand and $630 thousand, respectively.

Valuation and Expense Information

All issuances of stock options or other issuances of equity instruments to employees as the consideration for services received by us are accounted for based on the fair value of the equity instrument issued. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the fair value of our common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of our common stock, a risk-free interest rate, and expected dividends. We also estimate forfeitures of unvested stock options. To the extent actual forfeitures differ from our estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. Compensation cost is recorded only for vested options. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of four entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. We use an expected dividend yield of zero, as we do not anticipate paying any dividends in the foreseeable future. Expected forfeitures are assumed to be zero due to the small number of plan participants and the plan.

During the nine months ended September 30, 2020 and 2019, 2,320,000 and 399,000 options were granted respectively. The weighted average fair value calculations for options granted during the nine months ended September 30, 2020 and 2019 are based on the following assumptions:

		For the nine months ended September 30,
Description		2020				2019
Dividend-yield			0	%			0	%
Risk-free interest rate			0.94	%			2.38	%
Expected volatility			88.15	%			88.54	%
Expected life (years)			6.55				6.55
Market value per share on grant date		$	0.69			$	0.78
Fair value per share on grant date		$	0.52			$	0.59

As of September 30, 2020, the Company had $1.1 million of total unrecognized compensation expense for employees, which the Company will amortize over the 2.0 years weighted average remaining term.